Technology Trends in the Financial Service Industry

Technology Trendsin the

Financial Service IndustryyLarry RyanJ 22 d 2012June 22nd, 2012Chief Technologist, Financial Service Industry

© Copyright 2012 Hewlett-Packard Development Company, L.P. The information contained herein is subject to change without notice.

Increasing Pressure on Financial FirmsFinancial System Soundness:Capital, quality, liquidity, & risk

Increasing regulatory pressure:greater levels of transparency

S hi ti t d b tt kSophisticated cyber attacks:secure infrastructure, data & apps

Customer experience:agility to retain and grow market

share

Shareholder Demand:


2

cost control & operational efficiency

Increasing Pressure on Financial FirmsFinancial System Soundness:Capital, quality, liquidity, & risk

80

100

Top Bank Efficiency Raio and ROE

Increasing regulatory pressure:greater levels of transparency

S hi ti t d b tt k

60

Sophisticated cyber attacks:secure infrastructure, data & apps

Customer experience:20

40

agility to retain and grow market share

Shareholder Demand:‐20

0


3

cost control & operational efficiency Efficiency Ratio ROE Source: www.bankregdata.com (2011Q4 Data)

Technologies Impacting Financial ServicesFocus on customer experience and

agility to retain and grow market share

• Market place for Shared agile servicesCloud

Shareholder Demand for cost and operational efficiency • Pervasive and end-to-endSecurity

Increasing regulatory scrutiny requires greater levels of transparency

Sophisticated cyber attacks require

• Derive meaning from the digital worldBig Data

Th di it l ltSocial MediaSophisticated cyber attacks require stronger secure infrastructure

Improve soundness by increasing it l d i i li idit

• The digital cultureSocial Media

• Anywhere computing: markets, apps, paymentsMobility


4

capital and improving liquidity paymentsMobility

2020 4B l li 31B t d d i 25M The Digital Life2020: 4B people online, 31B connected devices, 25M apps

Consumer ProfessionalCHANNEL SERVICESCHANNELS

USER SECURITY SERVICES (SSO, Authorization and Access Control)

CHANNEL INTEGRATION

Mobile Datacenter

HYBRID DELIVERY CLOUD

CHANNEL INTEGRATION

SERVICE SECURITY (Authentication, Authorization and Access Control)

SERVICE SECURITY (Authentication, Authorisation and Access Control)

BUSINESS SERVICES

EXTERNAL INTERFACES

ENTERPRISE SYSTEMS

INFORMATION MANAGEMENT & DATA SERVICES

CORE BANKING OPERATIONS

PLATFORM SECURITY (Authentication, Authorization and Access Control)

PLATFORMS

INFRASTUCTURE SECURITY

IT INFRASTRUCURE

CORPORATE

RETAIL

RISK MANAGEMENT & COMPLIANCE

WEALTH MANAGEMENT

TRADING

TREASURY & CASH MANAGEMENT


5

Source: IDC, ICT Outlook: Recovering Into a New World, #DR2010 GS2 JG, March 2010

Mobile Datacenter

2020 4B l li 31B t d d i 25M The Digital Life: Data2020: 4B people online, 31B connected devices, 25M apps

TransactionsTransactions Social InteractionsSocial InteractionsPaymentsPayments

PhotosPhotosMovies/VideosMovies/Videos

M iM i

PersonalPersonalExhaust DataExhaust Data

MapsMapsL tiL ti



CHANNEL INTEGRATION

MusicMusicBooksBooks

MagazinesMagazinesNewspapersNewspapers

LocationLocationScientific DataScientific DataLife FootprintLife Footprint

BiologicalBiological

Mobile Datacenter


CHANNEL INTEGRATION



BUSINESS SERVICES

EXTERNAL INTERFACES

ENTERPRISE SYSTEMS




PLATFORMS


IT INFRASTRUCURE

CORPORATE

RETAIL


WEALTH MANAGEMENT

TRADING

TREASURY & CASH MANAGEMENT

NewspapersNewspapersArtArt

Public RecordsPublic Records

BiologicalBiologicalEnvironmentalEnvironmental


6


Mobile Datacenter

Cloud


Cloud computing types for financial service firms

Banker

Core AttributesCore AttributesElasticElasticPayPay--perper--useuseNetworkedNetworked

Trusted external service providers

//

NetworkedNetworkedSharedSharedOnOn--demanddemand

Markets/CommunitiesMarkets/Communities

Software Services (Software Services (SaaSSaaS))

Platform Services (Platform Services (PaaSPaaS))

InfrastructureInfrastructure Services (Services (IaaSIaaS))


8How is it used? What is delivered?

The Financial Service Marketplace evolvesNASDAQ

Market Replay

Expanding intoExpanding into cloud services

Attacking legacy b i d lbusiness models


9 “Cloud” ServicesLegacy Services

Value of Cloud in FSIh ll d b kh ll d b kTop Challenges Faced by BanksTop Challenges Faced by Banks

Manage RecoveryManage Recovery Grow Customer BaseGrow Customer BaseHandle host of New & Changed RegulationsHandle host of New & Changed Regulations Absorb AcquisitionsAbsorb Acquisitions

Three Key Drivers for Cloud AdoptionThree Key Drivers for Cloud Adoption

Cost ReductionCost Reduction Speed to DeliverSpeed to Deliver AgilityAgilityOvverall cost reduction through –• SaaS - Avoidance of infrastructure cost • PaaS - Quicker development cycles• IaaS - Increasing utilization of infrastructure

components reducing total infrastructure needs overall

With technology innovation becoming more of an enabler of new banking products and channel innovations as well as increased regulatory changes expected, a bank's ability to quickly adapt to the changing landscape or become a market innovator by leveraging

Banks looking at Agility specifically with reference to IaaSLarge-tier banks &"megabanks" have extremely large sets of data and very high transaction volumes in solution areas that are load-intensive and read-intensive such as riskoverall

Enable banks to increase control over IT infrastructure with regard to fixed vs. variable costs and opex vs. capexFlexibility and control over costs to react to what is becoming an increasingly volatile economic

diti

y g gtechnology is a distinct competitive advantageCloud computing can offer faster initial implementations by eliminating the need for lengthy hardware acquisition cycles or capital investment project reviews

intensive and read intensive, such as risk management, trading algorithms, pricing, quantitative analysis and payments processingMegabanks are adopting or considering private cloud (internal to bank) IaaS to reduce overall infrastructure cost through consolidation of servers data centers and higher utilization of


10

condition servers, data centers and higher utilization of their server footprint

Source: Market Insight: The Impact of Cloud Computing on Vendors in Banking – Gartner June 2010

HP Converged Cloud Portfolio

BUILD, MANAGE & SECURE

CONSUME Off-premise services

SECURE(across all models)

• CloudSystem• IT Performance Suite

Managed Cloud• Enterprise Cloud Services

• IT Performance Suite Services

A t P t t & P t

INFORMATIONAPPLICATIONS

INFRASTRUCTURE

• IT Performance Suite• Converged Infrastructure

• Autonomy Protect & Promote Services

Public Cloud• HP Cloud Services

Public Cloud

Traditional Private Cloud Managed Cloud

PROFESSIONAL SERVICES


1111

Consulting & implementation Financing Education

S i i lti l b k i S it l dHP banking service centerServicing multiple banks in Switzerland

•Core banking services•Single application instance

Bern Banking Service Bern Banking Service CenterCenter

LargeLargeLocationsLocations

•Single application instance•Service delivery model•Usage-based pricing

WAN

Small Small LocationsLocations

MediumMediumLocationsLocations

OfficeSpace

DataCenter

LiebefeldLiebefeld

•Consistent compliance•Innovative product design tool•Transaction hub

External GatewaysExternal Gateways

Public Internet

Other ClientNetworks

BulgariaBulgariaBank Bank CustomersCustomers HP Services

Network•Transaction hub•Real-time multi-channel operations•365x24 operations

SlovakiaSlovakia

HP Global HP Global

Second Data Second Data CenterCenter

Small Small

LargeLargeLocationsLocations

DataCenter

Network


12

Global Apps Global Apps CapabilitiesCapabilities

NetworkNetworkOperationsOperations

CenterCenter

LocationsLocationsMediumMediumLocationsLocations

D li i h b id d li l dGlobal bank use caseDelivering a hybrid delivery cloud

•Deliver IT as a service•Co-branded•Co-branded•HP designed, built, delivered, and operated•Engaged risk management, compliance, and security officers•Regulatory Compliance a key driver•Expandable service catalog and price list•Expandable service catalog and price list•Provision in hours as opposed to days


13

Key take-aways

Cloud is an emerging disruptive force; a strategic transformation and journey11

Cloud decreases time to market, increases agility, reduces cost, and enables new business models22

Assess what assets can move to cloud and start with an internal IaaS as a foundation towards a service ecosystem33

HP recommends a hybrid delivery framework to integrate all sources and automate 44


14

Security


Top 5 Global Risks in Terms of Likelihood


1616 Global Risks 2012 Seventh Edition, World Economic Forum,http://www3.weforum.org/docs/WEF_GlobalRisks_Report_2012.pdf

The Threat

•SWIFT: The operator of the world’s largest messaging network for financial transactions said its communicationsnetwork for financial transactions said its communications systems are facing record levels of aggression from cyber hackers and attackers *hackers and attackers.•38% of financial services respondents say they have been hit by cyber crime of one sort or another. **y y•Ponemon Institute found that >1 successful attack/week/company (44% increase).***


17* http://www.securitiestechnologymonitor.com/news/swift-terrorism-at-new-peak-shah-30120-1.html?zkPrintable=true** Cybercrime: protecting against the growing threat, Global Economic Crime Survey, Nov 2011, PWC.*** Second Annual Cost of Cyber Crime Study, August 2011, Ponemon Institue.

Example Breaches

Global BanksCommunity BankBank Outsourcer

ExchangePayment Networks


1919

HP’s Framework Embodies End-to-End S itSecurity

INFORMATION SECURITY MANAGEMENT

Threat & Risk Management

Security Architecture

Policy and Risk

Security Performance Compliance

and AuditTraining and Awareness

Security Supplier HP Secure Boardroom

SECURITY OPERATIONS

Management ArchitectureRisk Management and Audit AwarenessManagement

Identity andRisk SecurityAccreditation &

HP Secure Boardroom

DATA CENTER NETWORK APPLICATION END-POINT

Identity and Access

Management

Risk Assessment

and Mitigation

Security Change Control

Incident Management

Monitoring and Alerting

Universal Log Management

Accreditation & Acceptance

TestingHP ArcSight SIEM HP IT Performance Suite

Data & Content Security

Business Recovery & Continuity Services

D t C t S it

Securing Data in Motion

N t k S it

IDS/IPS Application Delivery

Securing Data in Use

A li ti S it A t E d i t S it

Mobile Security

Securing Data at Rest

HP Tipping Point

HP Enterprise Secure Key Mgr


21

Data Center Security Network Security Application Security Asset, Endpoint SecurityHP Fortify Security Center

Key take-aways

Security and risk management alignment11

Security and IT operations integration22

Situational Awareness / Rapid response33

Actively and Continuously monitor and evolve44


22

Big Dataa sub-category ofInformation Management


DefinitionUploading video

in the US

Social networkingIn Germany Researching in

China Of the 6.9 billion people in the world, only 2.3 billion are online.Chatting in India

Blogging in Brazil

2020

only 2.3 billion are online.

202025 million apps4 billion people online

http://www.internetworldstats.com/stats.htm

450 billion online interactions, per day1.3 trillion tags/sensors

31 billion connected devices

50 t illi i b t f d t t d

Spe

ed

Complexity


24

50 trillion gigabytes of data created

Big Data valuable to Financial Services


25

“Big Data: The next frontier for innovation, competition, and Productivity, McKinsey Global Institute, Presented at SIBOS, September 20, 2011

What are Banks doing?

•Track behaviour"Our top business

challenges are optimizing•Adjust risk exposure•Correlate with transactionU d t d

challenges are optimizing customer relationships,

optimizing financial functions, Reducing business risk and

•Understand•Predict and influence

ensuring regulatory compliance. Our prioritization is around our customer and

thenthenrevenue / profits."

– C Level Executive


26

Benefits for Banks

•Customer behaviourMultichannel Customer Interaction•Multichannel Customer Interaction

•Product Innovation•Risk Management and Compliance•Risk Management and Compliance•Strategy and brand marketing•Archiving & eDiscoveryArchiving & eDiscovery•Information Management


27

Making the most of structured and unstructured data From Information to Insight

g

DATA: BIG, FAST, TOTAL • Big streams of rich dataBig streams of rich data • Fast insight on data in motion (e.g., sensors)

• Across Total relevant data sets

D t I i htINSIGHT @ SPEED OF BUSINESS

Next wave of analytics apps in connected world – high scalability, least energy

Data sources

Insights & actions


29

HP: THE NEXT GEN INFORMATION PLATFORM

Audio Video TextsEmail Social MediaSearch EngineMobileTransactional Data IT/OT Documents Images

CONTEXT-AWARE COMPUTING PATTERN-BASED STRATEGY INFORMATION SHARING MONETIZING INFORMATION

THE NEXT GEN INFORMATION PLATFORM – IDOL 10 / Vertica

• Provides the ability for enterprise to leverage and use 100% of their structured and unstructured business relevant information

• Understands the meaning and context of Human and Extreme information

f i lbusiness relevant information • Performs advanced analytics and applies pattern-

based strategy in real-time• Designed to provide unprecedented speed,

• Ability to process information in-place or in a data warehouse

• Makes information accessible to all enterprise applications


31

g p p p ,simplicity and scalability

pp

Key take-aways

New Architecture11

Enables transparency22

Enables experimentation, analysis, value creation, and new business models33

Data Policy44


32

Social Media


Social Media


3434

Social Networks Demographics

1 400 000 000

1,600,000,000

Population/Registered Users

800 000 000

1,000,000,000

1,200,000,000

1,400,000,000

400,000,000

600,000,000

800,000,000

0

200,000,000


3535

Corporates embracing social media


3636Source: “How social technologies are extending the organization”, McKinsey Quarterly, November, 2011, http://www.mckinseyquarterly.com/High_Tech/Strategy_Analysis/How_social_technologies_are_extending_the_organization_2888

Examples in Financial Services


3737

Virtual Currencies & Loyalty Programs

F t FlFrequent Flyer Programs


3838

Key take-aways

Reach and learn from customers11

Mange brand22

Drive campaigns33

Govern appropriate usage44


39

Mobility


A d th l i Mobility becomes part of life for everyone... And the scale is enormous•Instant connections, communication & collaboration is changing people’s behavior

•Access to on line services is part of daily activity – Mobility First is quickly becoming the


41

y y y y gbusiness top priority

Online and Mobile Banking Transactions C ti t I R idlContinue to Increase Rapidly

US Self-Service Banking Transactions by Channel (In Billions)100 ATM

(CAGR 0 8%)

14 060

80(CAGR = 0.8%)Online(CAGR = 20.1%)M bil

18 6 23 3 26.8 30.0 33.3 35.0 1.2 3.0 5.6

9.4 14.0

40

60 Mobile(CAGR = 84.8%)

14.0 14.2 14.3 14.4 14.5 14.6 14.6 14.7 14.8 15.0 15.1 5.6 7.3 9.1 11.8 15.3 18.6 23.3 26.8

0

20

2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013


42

42

Source: TowerGroup

2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013

US Branch Transactions Are Declining (2010 14P)(2010–14P)

Transactions (In Billions)14 7015 14.70

14.11

13 6914

15

13.69

13.28 12.88 13

12


43 Source: TowerGroup

2010 2011 2012 2013 2014

Mobile Payments LandscapePhysical Location / POS Online Mobile

P2P Transfers

(Domestic and International)International)

Payments to

Merchants


44

Slide 44

* Updated version of table from Edgar, Dunn & Company

Example Mobile Applications


45

Bring Your Own DeviceBalancing choice while protecting corporate assets

• Employees and customers use

Balancing choice while protecting corporate assets

BenefitsShift t t

p ytheir own device• How to:

E b

•Shift cost to users•Increasing employee satisfaction•Accelerate technology adoptionConcernsA t bl U P li• Embrace

• Govern usage• Protect assets and data

•Acceptable Use Policy• Minimum security policy• Company mandated security tools•Compliance and data ownership•Retrieving company data on separation

• Path towards pervasive computingg p y p

Risks•Unencrypted information•Consumer Applications•Weak passwords and security


46

p y

Key problems for ITManagement of different platforms

• From a single client OS to multiple OS

Management of different platforms

2007 2010 2013

• Different devices, different form factors, different update and life cycles ?y

• How to manage migration of existing platforms

?

• What about current desktop /Laptop strategy


47

Own vs BYOD

Security and risk management Is it safe?Key issues for IT

Device Overload Ever-Changing Types,

h

Security and risk management – Is it safe?

OSs and Security Features

Network Threats Usage of Many Secure

App Threats Insecure Access

to Corporate Apps Data Threats

and Unsecure Networks

Lack of Mobile NetworkVisibility

Apps

Lack of Reliability

U Th t

Sensitive Data Leakage

Device Lost or Employee Leaves

Corporate Network Vulnerability to Mobile Threats

Acting in Non-Compliant / Wrongful Ways

User Threats


48

Wrongful Ways

BYOD Considerations• Trust Model• Remediation optionsTi d li• Tiered policy

• User experience vs. security exposure tradeoff• Corporate data protection (in transit, on device)p p ( , )• Device control• Acceptable use policy (cloud services)Li bilit t• Liability assessment

• Education


4949

Hp Enterprise Mobility Services FrameworkFramework

• App Virtualization• Desktop Virtualization• Mobile Apps – Native, Web

Mobility Apps Platform

• Voice Transformation• Virtual Workplace• Unified Messaging

Unified Communication

PROSUMER• Network Protection• Cloud Protection• Mobile Data Protection

Mobility Protection

• Infrastructure Mgt• Mobile Device Mgmt

Mobility Device Management

• Mobile Access Protection

• Performance Engineering

Mobile Applications

• Storage Consulting

Mobile Data

Performance Engineering• App Transformation• Mobile App Management• Windows 7/8 Migration

• Storage Consulting• Mobile Data Trans.• Enterprise Data Sharing• Analytics/BI


50

• Education Services (UC)• Education Services (Mobility)• Mobility Policies (BYOD)

GRC - MoC

• Network Transformation• Voice over Wi-Fi• Fixed Mobile Convergence• Cloud Services Integration

Enterprise Connectivity

• Search/ Information• Document Management• Social Collaboration• Mobile Process Enablement

Collaboration

Key take-aways

Mobility is the transaction platform of the future11

Expect rapid technology innovations in near term22

Enables innovation business models33

HP recommends an encompassing platform44


51

Summary


Positioned for the Future Mobile Social Network

10 Billion Mobile Devices Human Decisions

• Personal• Organizational

10 Billion People

Insights &

Enterprise &

Sea of Sensors

1 Billion 1024 bytes of

1 TrillionSensors

Process Control• Machinery• Workflow 100 Million

10 Billion Processes

Insights & Actions

Consumer Datao

ServicesStored Data Entities

OUR ARCHITECTURE YOUR BENEFITS • Data and transform co-located• Distributed and interdependent• Secure and auditable

• Fastest time to insight• Most connection to sources and actions• Isolation between circles of interest


53

2020 4B l li 31B t d d i 25M Key Takeaways for Financial Institutions2020: 4B people online, 31B connected devices, 25M apps

Corporate and cons mers al a s onlineCorporate and cons mers al a s onlineCorporate and consumers always onlineCorporate and consumers always onlineEverything digitalEverything digital

ServiceService--based economybased economy



CHANNEL INTEGRATION

ServiceService based economybased economyData in motion architectureData in motion architecture

Marketplace growthMarketplace growth

Mobile Datacenter


CHANNEL INTEGRATION



BUSINESS SERVICES

EXTERNAL INTERFACES

ENTERPRISE SYSTEMS




PLATFORMS


IT INFRASTRUCURE

CORPORATE

RETAIL


WEALTH MANAGEMENT

TRADING

TREASURY & CASH MANAGEMENTAgility & Speed to MarketAgility & Speed to Market

GRC: Governance, Risk, and ComplianceGRC: Governance, Risk, and Compliance


54


Mobile Datacenter

Thank you


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